Is your monthly fee high enough?

perpetual calendarClients that pay a monthly fee are great: they provide stable income and the opportunity for bigger-scale projects to develop with the client. They are also a sign of trust from the client.

Monthly fee contracts are also tricky: how can we set a fixed monthly amount that covers all costs for that client? When is work outside of the contract and to be billed separately?

Here are a few pointers:

  1. Start with a short-term contract with your client. Doing a 3-month or 6-month contract at first will allow you to see the actual work involved monthly for that client, as well as expenses. This will help you not only figure out if the fee is appropriate for the work, but also show documentation to your client on actual time and expenses incurred.
  2. Write it down. Precisely. It doesn’t matter how nice the client is. It doesn’t matter how long you’ve been doing business with them. Spelling out exactly what work is included and what work is not included – especially what is not included – will provide a base to settle disagreements, should they happen. It also adjusts everyone’s expectations.
  3. Figure out if it’s profitable for your firm. After a few months (even a year) of working on a monthly-fee contract with the client, you’ll have enough data to compare costs and revenues and decide if your profit margin on those contracts is high enough. Sometimes, low-margin contracts are a step in the door to bigger, higher-margin ones. Sometimes, they don’t pan out.  It’s important to decide if, as a business, you’re willing to keep low-margin contracts.

What about you? What are your thoughts on monthly fee contracts?